Ladies and gentlemen, good day and welcome to the Poonawalla Fincorp Limited Q3 FY25-26 earnings conference call. We have with us today on the call Mr. Arvind Kapil, Managing Director and Chief Executive Officer. Mr. Sunil Samdani, Executive Director. Mr. Sriram Iyer, Chief Credit and Analytics Officer. Mr. Vikas Pandey, Chief Business Officer, Consumer Business. Mr. V. Raghavan, Chief Business Officer, Commercial Business. Mr. Harsh Kumar, Chief Human Resources Officer and Head of Artificial Intelligence, and other senior management officials.
As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded.
Now, I hand over the call to Shabnam Zaman, Company Secretary of Poonawalla Fincorp Limited. Thank you and over to you, ma'am.
Thank you. In line with good corporate governance practices, please note this presentation may contain forward-looking statements regarding the company's future business prospects, strategies, estimates, and profitability. But it is important to note that these statements are based on certain expectations, assumptions, anticipated developments, and are subject to various risks and uncertainties. The actual results may differ significantly from what is stated in these forward-looking statements.
Risks and uncertainties related to these statements include fluctuations in earnings, our ability to manage growth, competition, economic conditions in India and abroad, changes in law, rules, and regulations relating to any aspect of the company's business operations, general economic, market and business conditions, attracting and retaining skilled professionals, as well as government policies and actions. Now, I would like to hand over to Mr. Arvind Kapil, Managing Director and Chief Executive Officer of the company.
Thanks, Shabnam. Thank you. A very good evening to all of you. I wish all of you and your loved ones a very happy New Year. I'll open with industry and economic perspective from our side and the ways we are shaping our organization amid the current sector shifts. India's real GDP grew at 8.2% in quarter two of the financial year 2025-26 up from 7.8% in quarter one. CPI inflation progressively softened to 1.33% in December 2025 from 4.26% in January.
High frequency indicators signal ongoing economic momentum with inflation below the lower tolerance band, falling unemployment and improved exports. Financial conditions in our assessment remain supportive and there's room for credit to grow while demand holds steady under strong consumption. Let me start with the performance update. I'd like to give a quick update on the quarter three financial year 2026 results.
Our AUM, as all of you are well aware, is growing at around 77.6% year on year, 13.3% quarter on quarter, standing at around INR 55,000.017 crores as of December 31st, 2025. Total disbursements in quarter three financial year 2026 grew by 84% year on year and 6.5% quarter on quarter. Our new product disbursements have reached a monthly run rate of approximately INR 950 crores in the month of December.
New products delivered at 25% quarter on quarter disbursement growth, demonstrating a tangible momentum and market pull which our new products are generating at a grassroots level, to give you guys a feel. Yes, the new product contribution to disbursements in quarter three financial year 2026 stands at 20% as compared to a 17% in comparison to the previous quarter. Our on-book secured mix stands at around 56%.
Net interest margin, including fee and other income, stands at around 8.62% in quarter three financial year 2026 versus an 8.4% in quarter two financial year 2026. So it's increased by around 22 basis points from quarter two to quarter three. Our GNPA for quarter three financial year 2026 stands now at 1.51% versus a 1.59% in quarter two financial year 2026. It's a drop of another eight basis points here.
Our Stage 1 assets, which I think is an important indicator for any brand company, rose to 97.4% for quarter three financial year 2026 as compared to 97.1% in quarter two financial year 2026. I think this is important from our efficiency improvement point of view, reflecting stronger asset quality and stable borrower performance. This improvement underscores our continued focus on improvement, underwriting, and effective risk management.
Our stated objective is to achieve one of the best-in-class credit costs, which requires a more balanced and mature portfolio mix for which transition is already underway. We've already launched new businesses, and they will pick up scale in different proportions over the years. Our cost of borrowing has reduced from 8.04% in quarter one financial year 2026 to 7.65% in quarter three financial year 2026. That's around 39 basis points in three quarters.
One of the key levers was the NCD contribution. It has substantially increased from 7% in March 2025 to 27% in September 2025, and now approximately to about 30-33% as of December 2025. Adding strength to long-term capital funding. Our aim is to ensure stable and cost-efficient funding. On AI, out of the total tally of 57 cutting-edge AI projects now, we've reached 30 projects live.
Let me start with how we think about credit cost and ROE, because this, I believe, sits at the heart of how we are building this company. It's important that we are all on the same page. We are designing a high-quality, stable, low-volatile credit portfolio, not accumulating a balance sheet. From inception, every product we scale is built to deliver sustainable, healthy ROE over a two-to-cycle basis.
Growth is therefore a means to compound intrinsic value, not an objective in itself. Let's understand the role of individual products. This contribution design, higher natural provision impact, and the mathematical average of approximately 12 products and then one business of instant consumer loans, making a total of 13 products. To provide clarity on how total credit cost should be viewed in my assessment, it's very important to recognize that different lending products inherently carry different risk profiles.
Instant loans, by design, carry a higher standard on credit cost, while the remaining approximately 12 lending products are more granular, diversified, and comparatively lower risk. We expect credit costs across individual businesses to decline steadily over time, driven by portfolio seasoning, our solid risk calibration, and strong collections, and that's going to be a big focus area for us.
At the consolidated level, reported credit cost represents, and this is important, a mathematical weighted average reflecting the proportional contribution of the instant loan business and the combined contribution of the other businesses based on their respective share of assets. Accordingly, portfolio-level credit cost is a function of portfolio mix and not driven by any single product in isolation. Accordingly, movements in consolidated credit cost should be viewed as a function of changing composition of the portfolio as different businesses scale at different times.
As the portfolio evolves over time, it's important to note products such as gold loans, education loans, salary personal loans, and loans against property are expected to account for 50%-60% of the portfolio. These businesses have lower inherent risk profiles, lower credit costs, and their growing contribution will lead to a more balanced portfolio in our assessment with growing ROEs and a sustained reduction in overall credit cost.
Let me share our perspective on growth, provisioning, and accounting optics in the credit context. Reported credit cost includes normal and regulatory provisioning and therefore reflects both realized losses and proven forward-looking buffers. Management remains focused on continuously improving credit calibration, underwriting discipline, and collection efficiencies across individual lending products, with an objective of strengthening overall portfolio credit performance over time.
Improving ROE is a key focus area for the company, and alongside efforts to enhance credit calibration and collection efficiency within individual lending products, management is equally focused on achieving the right product mix to balance risk and returns and the objective of driving sustainable ROE improvement. We will share meaningful insights and early risk indicators across products, which is quite encouraging. Let me cover my perspective on ROEs, which is going to be a key focus area for the company. We've reached an ROE of 1.2% this quarter, quarter three.
At this juncture, let me give you a sense of disbursement yield for quarter three financial year 2026. I think this could be an important metric. The present disbursement yields, pricing of new originations for quarter three financial year 2026, is approximately 15.5%, reflecting the impact of new product launches and disciplined risk calibration across originations.
The new products we've launched have scaled well and are performing even with our internal expectations. This gives us confidence that growth is now coming from a more diversified and structurally stronger portfolio. On the risk side, credit costs are trending better quarter after quarter. The new credit calibration is behaving well. Early indicators are encouraging, and we're seeing improved performance across franchises.
As committed, we have increased our disclosure, wherein this time we're sharing product-level AUMs across products, and I think a very important indicator the risk team is sharing in the investor deck is the sixth MOB, early risk indicator, which in my experience is a lead indicator for any finance company in terms of what the new calibration looks like. At the same time, I do believe that operating leverage is beginning to come through.
Our operating model is built to deliver structural operating leverage as we scale multiple product distributions, digital platforms, distribution partners, and enhanced customer franchise with increasing cross-sell strength, fueling the strength of our operating leverage. Putting all this together, early disbursement yields, successful product launches, improving credit outcomes, and operating leverage, we believe that the structural levers are firmly in place now.
As these trends continue, we see a clear progressive build-up over the coming periods. On a customer service front, let me share an important perspective. We are launching a next-generation conversational AI platform for omnichannel customer service designed to autonomously resolve 80% of voice and chat interactions, significantly reducing cost to serve while improving customer experience. Only high-entity and exception cases are routed to human agent, driving operational efficiency and scale.
Our industry-first contextual agent UI that delivers real-time intelligence, including customer history, loan risk flags, and sentiment analysis, enabling faster resolution, higher first-contact closure, and improved compliance. It's important to note the platform is powered by multi-agent AI orchestration and is currently in COG testing with Hindi and English.
That will go live by March 26. Subsequently, in phase, we will deploy AI voice agent across six regional languages and chatbot in 14 regional languages, unlocking mass market adoption across India, linguistically diverse customer base. This, I believe, in my limited view, should transform our customer service and make it really smart. Now, let me talk about a quick sense on the debt strategy. As part of our long-term debt strategy, we endeavor increase to be in the range of 30%-35% of our total borrowings.
We shall keep following the highest standard of governance and transparency with complete disclosure of the outcome of the liability management. I shall share some of the key highlights to give you guys a sense. In line with the guidance provided during our last investor call, we've successfully raised over 4,500 crores by way of secured NCDs during quarter three and a total of around 12,330 crores during the nine months.
The share of NCD in our borrowing stands at 33% as of December 31st, increased 7% as of March 31st. This increase in NCD borrowing is also contributing to significant diversification of our... Ladies and gentlemen, the line for the management has been disconnected. Please wait while we reconnect them. Thank you. Ladies and gentlemen, the line for the management has been reconnected. Yes, sir, please go ahead. Okay, let me just repeat the previous point.
Our endeavor is that AI initiatives will amplify our strength. We've initiated 12 AI projects in quarter three financial year 2026 across credit, collections, servicing, and operations to reduce manual effort, improve decisioning, and enable higher volumes without commensurate increases in headcount or expenses. Crucially, this leverage is achieved with disciplined risk management.
As a result, we believe our past 18 months' well-calibrated AUM growth, coupled with present runways, are expected to translate into sustained profitability, driving steady improvements in ROE. Now I'd like to hand over to the Chief Business Officer, Vikas Pandey, and then subsequently V. Raghavan to give you a sense on the business updates. Thank you, Almin. Good evening to all of you. My name is Vikas Pandey. I'm Chief Business Officer for Consumer Business.
Over the past few quarters, our new businesses have scaled meaningfully with constant emphasis on high-quality growth, discipline execution, and technology-led efficiency. Our prime personal loan business, launched in August 2024, continues to gain strong traction. In quarter three financial 2026, we delivered average monthly disbursements of nearly INR 430 crore, reflecting growing customer confidence.
What is particularly encouraging is the quality of the book. Over 70% of customers have bureau scores above 750, are salaried with category A corporates, and earn net monthly income exceeding ₹75,000. This validates our risk-calibrated acquisition strategy. Digitally, we continue to raise the bar. 28% of disbursements for prime personal loan in quarter three were processed fully straight through with zero manual intervention, and our scoring is focused on scalable and efficient operations. Alongside digital scale-up, we are also strengthening our secure portfolio like gold loan.
Our gold loan franchise is expanding rapidly, and we remain well on track with the planned rollout of new year branches during the current financial year. In gold loans, monthly disbursements have nearly doubled from INR 110 crores in September to INR 207 crores in December 2025, driven by strong branch productivity. 95% of our branches are in tier two and tier three markets, creating high-potential multi-product distribution hubs.
Early cross-sell traction from these catchments is very encouraging. Our next product, Consumer Durable Business, continues to scale efficiently, on track to reach 12,000 retail outlets by the year end across 190-plus locations. During the festive month of October 2025 alone, we disbursed INR 118 crore to 54,000 customers entirely through a seamless digital journey, demonstrating both scale and execution capability. OEM partnerships are expanding across mobile and consumer durable segments, and the PFIN EMI card has seen strong market acceptance.
With pre-approved limits and availability across all touchpoints and now live on our app and website, the card is becoming a powerful enabler of repeat usage and customer stickiness. Our next product, Commercial Vehicle Business, has delivered average monthly disbursement of INR 100 crores in quarter three financial year 2026, representing 35% quarter-on-quarter growth. UCV Financing continues to anchor the business, contributing over 70% of disbursements.
We have significantly expanded our channel ecosystem to 700-plus partners, up from 450 last quarter, and now operate across 55 locations with strong momentum in Gujarat, Rajasthan, Tamil Nadu, and Maharashtra. Next product, Education Loan. In just nine months since launch, the education loan business has logged 16,000-plus files supported by a network of 325-plus consultants and partners. By financial year 2026 end, we aim to expand our consultant network beyond 500-plus. Our disbursement in the month of December has reached INR 118 crores.
Our instant sanction journey in education loan has crossed 300 sanctions, valued at INR 150 crores year-to-date. Now coming to our digital marketing strategy, it continues to evolve toward a diversified ROI-led AI-first model with five key focus areas. The first one, deepening our digital partner ecosystem. We now work with 38-plus digital partners, driving 42% quarter-on-quarter growth in disbursements while reducing platform concentration risk. Second, driving cost efficiency through technology-led innovations.
Our paid campaigns have seen efficiencies from near real-time data sharing and will continue to optimize and drive precision with the upcoming server-to-server integrations. Third, we have further improved our website performance through faster load times, better discoverability, and SEO-led enhancements. We have also stepped up our presence off website through content presence across relevant external platforms. This has driven over 150% quarter-on-quarter growth in our visibility across Google's AI-driven search and discovery results.
Fourth, our market stack now embeds AI across own channels, allowing us to run and scale experiments on content, timing, channels to drive better retargeting, superior convergence, lower acquisition cost, and improved customer lifetime value. Fifth and the last, our contextual and AI-enabled brand investments are helping reinforce brand trust and salience while remaining closely linked to business outcomes.
So finally, across businesses, the common thread is very clear: credit-first, compliance-first approach, discipline execution, scale with quality, and leverage AI and technology as a force multiplier. We are building platforms and portfolios designed not just to grow faster, but to grow better and compound over time. Thank you. And now I hand over to V. Raghavan to give you all a flavor on commercial business.
Good evening, everyone. My name is V. Raghavan. I am the CPO for Commercial Business. The Commercial Business basket of products consists of Loan Against Property, Business Loans, Loan to Professionals, Medical Equipment Loans, Machine Loans, Shopkeeper Loans, and Mid-Market Finance. Over the past 18 months, we have built the commercial business around three important vectors. The first important vector is people. People are the key to success of any business, and we have meticulously worked on the same to build winning teams across verticals.
The second most important vector is distribution. In distribution, we have not only worked to increase our reach into new markets and channels, but also worked to penetrate deeper in existing markets and channels. This we have done by closely working with our channel partners, using our decade-long relationship with them, and by providing them with superior tack and service.
Also, we have invested in our in-house direct distribution channel, which would operate mainly out of gold loan branches launched, sourcing all commercial retail products in the catchment areas and locations. The third most important vector is infrastructure. By infrastructure, I mean process infrastructure, policy, and product. We have concentrated on the three P's of process, product, and policy, redefined them, re-engineered them for customer delight, bringing in best-in-class tags by leveraging our digital expertise.
By doing this, we have succeeded in growing all commercial products with our risk-first, governance-first approach. Here's a detailed breakup of the commercial business numbers. Commercial business AUM stands approximately at INR 33,700 crore, exhibiting a very robust growth year-on-year. Our LAP AUM stands at approximately INR 15,100 crore and is the major contributor to the commercial business AUM. Our unsecured business loan, loans to professionals, and shopkeeper loan AUM stands at approximately INR 8,000 crore, growing substantially year-on-year.
Our medical equipment and machine loan AUM stands at INR 660 crore. We have now built the base to grow this book aggressively going forward. Our mid-market AUM, which includes NBFC and supply chain finance, stands at approximately INR 9,400 crore. Approximately 72% of the commercial business AUM is secured in nature. As mentioned earlier, we started our in-house direct distribution channel, sourcing all commercial retail products around nine months back, and I am happy to announce that this non-VSA channel has started contributing approximately 22% of the overall commercial retail loan disbursements.
We are on track to achieve 40%-50% of the total commercial retail disbursement through the direct channel over a period of time. As the share of the direct channel disbursement increases in the overall mix, it reinforces the strength of the direct distribution non-VSA channel, leading to sustainable profits of the commercial retail products.
On the digital front, we are ready and piloting our straight-through digital business loan offering, which will be the first of its kind in the self-employed space. We are also enhancing the product suite in the machine loan and medical equipment business by launching the lease business. Summing it up, we believe that the commercial business has methodically implemented the plans with risk-first and governance-first framework and built the foundation for industry-leading growth in all commercial business products, as the commercial business remains one of the most important vectors in the overall PFL strategy. Thank you. Now I hand it over to Harsh to brief you on digital and AI initiatives.
Thank you, V. Raghavan. Good evening, everybody. My name is Harsh Kumar. I'm Head of Artificial Intelligence. I want to take you through what we are doing in AI. AI continues to be a central enabler of our operating model transformation. In Q3, we advanced our AI initiative, focused on lifting productivity, reinforcing governance, and streamlining customer and employee journeys. These action materials strengthen our ability to scale efficiently and deliver sustained performance as we transition towards a more intelligent and data-driven operating model.
We have built a governance framework for all our AI projects, incorporating the Seven Sutras as defined by the regulators. This has been adopted to ensure consistency of delivery along with safety and accuracy. Given update on AI landscape at PSM, I would like to take you through a few of the major projects introduced across the organization in the last quarter.
The IT development team has taken significant steps to accelerate and optimize the application development lifecycle with the introduction of Build Buddy, an AI-powered assistant acting as a development buddy that aids in writing code and also suggests fixes before code is committed. It does this by providing contextual feedback on logic, performance, and readability, along with automated refactoring.
The rollout of Dart Genie, an AI-driven natural language insight engine empowers the internal team to access data insight simply by asking questions in plain language. Currently available in the operations and HR team, this capability reduces dependency on specialist support and accelerates decision-making at scale, with plans to extend its reach to other functions, including customer service and finance too. Within the risk team itself, we have delivered an AI-driven solution that aids in post-sanction review for the personal product by enabling teams to operationalize a comprehensive risk hindsight process.
The system automates document interpretation, field-level validation, and detailed audit logging, materially improving accuracy, reducing manual intervention, and strengthening the discipline of our risk governance. The next step is to extend the risk hindsight framework enabled by AI across broader lending portfolios. To aid our strategic initiative, we have created an AI-powered competition benchmarking engine that, on its own, searches for changes, analyzes market and competition, and delivers timely insight on pricing and product shifts.
By embedding AI into our strategic decision-making, we are not just benchmarking competitors. We are building a future-ready financial organization that leads with insight, agility, and customer centricity. We have our in-house employee support assistance by HR that has been enhanced with additional agent-driven capability. This smarter AI-powered solution executes contextual actions such as instant various employment-related document generation with improved accuracy and intelligence.
By introducing autonomous agent-driven workflows, the tool significantly improves employee experience and enables HR teams to shift their focus towards strategic initiatives. We have introduced our central KYC AI platform, embedding upfront AI-driven checks into KYC workflow. This brings intelligent upfront validation of KYC data, reducing manual intervention by roughly 15% and materially strengthening both accuracy and turnaround performance.
Credit AI, our AI-enabled underwriting support engine, has achieved full adoption in personal loan underwriting, significantly enhancing productivity and enabling underwriters to concentrate on risk judgment or manual processing. We have started scaling this across our broader portfolio, and the upcoming launch of SARC will add a new layer of AI-driven portfolio intelligence.
We have also launched a multilingual AI-driven conversational agent that initiates calls to prospective customers, screens them on key eligibility parameters, validates interest, captures required data, and initiates the loan journey before connecting them to respective teams based on their requirements. This brings more contextual and consistent conversation and improves productivity and conversion rates in key customer acquisition units.
The solution is currently implemented for specific business units with plans to extend the same to other product lines. In conclusion, AI initiatives delivered in Q3 FY 2026 constitute a significant advancement in the organization's ongoing transformation. They enhance the effectiveness of our workforce, reinforce the robustness of our governance framework, and enable a more seamless and intuitive experience for our stakeholders. More importantly, these initiatives further activate our long-term vision to become a digitally fluent, data-driven, and highly scalable financial organization, with AI-first approach being adopted across functions.
I would like to now hand over to Mr. Sriram Iyer, our Chief Credit and Analytics Officer.
Thank you. Thank you, Harsh. Good evening, everyone. I'm wishing you all compliments of the season. The economic landscape has observed a series of monetary policy adjustments, including cumulative repo cuts of 125 basis points since January, GST2 rationalization, and tax reforms highlighting government aim to support growth and enhance liquidity in the system. Northward movement in the consumer vehicle sales in Q3 FY 26 reflects positive movement in domestic demand, resulting in improvement in trade uptake.
India's outstanding loans grew at around 11% year-on-year, and positive economic momentum favor growth opportunities. Poonawalla Fincorp is aligned to this positive momentum and focused towards building a resilient portfolio. Effective orchestration of risk-calibrated framework has supported growth trajectory, ensuring stability and predictability in business performance.
Risk, credit, and collections working in synergy are the backbone of a resilient and well-structured portfolio. Focusing on the asset quality, let me give you a glimpse of our key trends. The GNPA has improved to 1.51% in quarter 3 FY 26 versus 1.59% in quarter 2 FY 26. Over the last four quarters, there has been a sequential quarter-on-quarter improvement in stage 1, stage 2, and stage 3 composition of assets, which highlights our calibrated approach to portfolio expansion and strengthened debt management practices.
Stage 1 composition in quarter 3 FY 26 is at 97.4% versus 97.1% in quarter 2 FY 26. Stage 2 composition in quarter 3 FY 26 is at 1.1% versus 1.3% in quarter 2 FY 26. The Stage 3 composition in quarter 3 FY 26 is at 1.51% versus 1.59% in quarter 2 FY 26.
The quarterly credit cost has improved to 2.62% for the quarter 3 FY 26 versus 2.67% for quarter 2 FY 26. For all products other than the instant consumer loans, the quarterly credit cost has been arranged for around 1.4%-1.5% for quarter 3 FY 26. Our endeavor is to be committed to a stated objective to hold best-in-class credit costs in the industry.
Let me highlight how we are aligning our credit philosophy into action. The first key aspect being credit by design. We expect a structurally improving asset quality trajectory driven by deliberate choices in product mix and disciplined risk calibration. Portfolio will be focused on products and customer segments that have inherently lower risk and more stable behavioral patterns. Our focus is on salaried low-risk asset class.
Loan Against Property book has a portfolio LTV of around 45%-50% of the market value, providing higher margin against outstanding principal. 70% of our exposures are extended against self-occupied residential or self-occupied commercial properties. 85% of our customer profile is being catered to the segment that has a bureau score of 750 plus. Early risk indicator of 6MOB 30 plus delinquency ratio for LAP portfolio remains strong at a sub-0.05% limit.
Gold loan portfolio is built with a skew towards emerging affluent households, with strong upward bull rate momentum, right customer profile selection gives them additional cushion to unforeseen market fluctuations. As of quarter 3 FY 2026, there are no accounts that have crossed 30 DPD. Education Loan exposures are driven towards students opting for top-tier universities, post-graduation international courses, and wealth-progressive households. Students' credibility, along with backing from strong parental credit history, provides alignment towards financial resilience.
Repayment performance is showcasing robust portfolio build-up. Commercial vehicle business offers secured and income-linked finance. 75% of our portfolio is built by used commercial vehicles. 60% of the customer segment is large fleet operators, providing long-term stability. As of quarter 3 FY 2026, there are no accounts that have crossed 30 DPD. Unsecured personal loans to salaried professionals being built is skewed towards higher bureau score. 70% of our customers have a bureau score of 750 plus. 75% of our portfolio is working with top corporates.
The 6MOB 30 plus delinquency remains range-bound at around 0.4%. Instant consumer loan is driven by existing to credit profile. Non-credit hungry and skewed towards formal credit-related cohorts. Given this is a digitally sourced book, the 3MOB 30 plus delinquency metric serves as a more reliable indicator of digital acquisition quality.
We are pleased to report that this metric has shown consistent improvement on quarter-on-quarter basis, with Q3 FY 2026 reflecting a 70% improvement compared to Q3 FY 2025. This positive trend underscores the effectiveness of our good strategies and continued focus on portfolio quality. Consumer durable funding is skewed to existing to credit, along with sizable influence of credit-diversified borrowers within ETC segment.
Right cohort selection in consumer durable business also sets precedents to control and minimize cash funding and fraud risk events prevalent in this product. As CD is a lower tenure book, the early vintage risk is tracked at a 2MOB 1 plus, which is at 0.15%, and 3MOB is at 0.06%. This metric has also been showing encouraging trends over the last three months.
Business loan portfolio growth is driven by customer segments with controlled lender position, credit history over five years, controlled unsecured leverage, non-credit hungry profiles, profiles with around at least two business cycles seasonally. The 6MOB 30 plus delinquency trend is range-bound for around the last two quarters and is 1.15%. Pre-owned car mix is driven towards profiles with controlled recency of exposure build, seasoned credit history for over five years plus.
The change in the mix of the portfolio has reflected encouraging reduction of 15% in 6MOB 30 plus performance in quarter 3 FY 2026 versus quarter 2 FY 2026, and around 30% reduction as compared to the same quarter previous year, quarter 3 FY 2025. DSL continues to manage risk in alignment with banking standards, as reflected in our 30 plus delinquency levels, which benchmark favorably against the others.
There has been a sequential improvement in the 6MOB 30 plus for the last four quarters. The 6MOB 30 plus for sourcing of quarter 1 FY 26 is 1.34%. This demonstrates the improved quality of a new acquisition. We expect credit costs across each of our individual businesses to decline steadily over the coming years, driven by improved portfolio and disciplined risk calibration, to strong collection efficiency across products. In addition,
we have consciously invested in products that have combined high ROA potential with structurally lower credit costs, which will further support improvement as the portfolio matures and their sizes increases. At a consolidated level, reported credit costs represent a mathematically weighted average of our portfolio, comprising of four business lines and one instant loan business. The consolidated figure primarily reflects the portfolio mix, particularly the relative weight of the instant loan portfolio versus the rest of the portfolio.
Accordingly, movements in the consolidated credit costs should be viewed as a function of the changing composition of the portfolio, as different businesses scale at different rates. Over time, products such as gold loans, education loans, salaried personal loans, and loan against property are expected to contribute an increasingly larger share of the portfolio. These businesses have lower inherent risk profiles and lower credit costs, and their growing contribution will lead to a more balanced portfolio with growing ROAs and a sustained reduction in overall credit costs.
Overall, our focus is to build the company on a strong ROA, and for which we will mix the well-calibrated instant consumer loans with the rest of the products, so the mathematical mix of well-calibrated portfolios builds a stronger value proposition. Second key aspect as we grow the book is calibration, quality, and pace.
The calibration drive is focused on optimized cohort selection via multi-source inputs. Information cover is not just limited to existing relationship behavior with DSL. We also look at bureau overall credit exposure history, banking via the account aggregator, GST, salary, and partner data. Augmentation of risk strategy via in-house proprietary models at product and cohort level are used as levers for optimizing risk metrics. Across the model lifecycle, from design to development to post-deployment monitoring, the model strength and accuracy is rigorously tested.
This is augmented with real-time through-the-door monitoring to control the expected PD against the sanction cost. As we speak, the decisions across credit lifecycle are supported by 50-plus AIML models and designed with over 5,000-plus feature evaluation. Further, given the portfolio build-up phase, dynamic model calibration with 4 months to 12 months supports the continuous improvement.
As I conclude, together, this step-by-step execution across origination, risk containment, and collection is translating into a structurally stronger portfolio. This approach is delivering cleaner incoming cohorts, lower embedded volatility, and sustained improvements in collection efficiency over the cycle. Thank you, and now I hand over to Mr. Sunil Samdani.
Thank you, Sriram, and good evening, everyone. Let me quickly take you all to the financial highlights of the quarter. The asset under management stood at 55,017 gross, representing a growth of 77.6% year-on-year and 15.3% quarter-on-quarter. As part of our debt strategy and projected AUM growth, we continue to diversify our liability book, focusing on long-term borrowings. Hence, the share of long-term borrowing has gone up by about 4% from 82% to 84% in an overall borrowing.
The share of variable-rate borrowing stood at approximately 50%, with another 9% of capital market borrowing, with an average tenor of approximately three months. The judicious use of short-term borrowing has helped us maintain our cost of borrowing at a competitive level. Our net interest income, including fees and other income, continues to grow healthy, standing at 1,080 gross for Q3 of FY 26, which is up 19.3% quarter-on-quarter.
This is despite maintaining a healthy share of secured asset book at 56%. The cost of borrowing reduced at 7.65% for the quarter, which is 7.69% in Q3 of FY 26. This is on account of overall reduction in the interest rate environment in Q3 of FY 26. OpEx to AUM for the quarter was at 4.41%, a reduction of 40 basis points quarter-on-quarter, primarily on account of improved productivity and efficiency.
Further, this reduction is despite continuous investment in new businesses and distribution. We have expanded our branch network to 320 branches as on date and increased employee strength to 5,264 as on 31st of December 2025. The pre-provision operating profit during the quarter was 528 crores, which represents a 36.5% increase quarter-on-quarter.
The asset quality improved quarter-on-quarter with gross NPA at 1.56%, which is a 0.05 reduction quarter-on-quarter, and net NPA reduced to 0.80% against 0.81% previous quarter. Our profit after tax stood at 150 crores for the quarter, representing a 102% growth quarter-on-quarter and 702% growth year-on-year. We can now see the benefits of AUM growth and investments in the new businesses coming in. The debt-to-equity ratio stood at 4.25 times, which gives us headroom for growth.
The capital adequacy ratio continues to remain healthy and comfortably above the regulatory requirement at 18.17%, of which the Tier 1 capital is at 17.15%. The liquidity coverage ratio at 156% as on December 31st, 2025, is well above the regulatory requirement of 100%. On the liquidity front, we remain comfortable at a surplus liquidity of ₹6,488 crores as of December 31st, 2025. Thank you. Happy New Year, and I would now like to open the floor for question and answer session.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Chintan Shah with ICICI Securities. Please go ahead.
Yeah, thank you for the opportunity and congratulations on the strong set of numbers and crossing the 1% ROA mark. So yeah, so my first question is on the asset quality. So if I look at the Provision Coverage Ratio for Stage 1, Stage 2, as well as Stage 3, it has been coming off since the last four quarters. Since December 2024, the Stage 3 PCR is almost down 10% to 48% now, versus 57%. The Stage 1 and Stage 2 PCR combined is now less than a percentage, versus 2.8% a year ago. So considering that 44% of our book is currently still unsecured, so where do we see this number settling on a steady-state basis? Yeah, that's the first question.
Yeah, hi, hi. This is Sriram here. See, as I said, there's a change in the product mix, and if you see your Stage 1 book has increased from 97.1% to 97.4%. And if you look at even prior to four quarters, it was close to around 95 points a week. So we are seeing that the Stage 1 asset itself has increased, so in terms of the overall Stage 1. Another important point to note here is the Stage 3 book has also reduced from 1.59% to 1.51%. That kind of explains the reduction in the PCR, right? Also, we'll have to note that the reduction in the PCR is also on account of the rundown of the old STPL, which had a higher provisioning.
So as the product mix changes and then you have low-risk kind of assets, the ECL also kind of changes accordingly, and that's the reason your PCR is lower. Sure, sure. So in terms of a steady state, so something around 50% PCR on stage three could be considered from a one or two-year perspective? I'm not on that because each product, as the mix changes and we start scaling up, we may look at a time horizon or something which we'll have to look at and based on which the provisioning will be made.
I think on the calibration, let me just add, Chintan, that we've this time disclosed very precise, I think if I'm not mistaken, a year and a half, approximately six quarters of data for six MOB, which will give a very good insight into how we are underwriting and what's the vintage-based information in terms of the quality on our entire book. I think that could be very, very other than Stage 1, that's another very strong first time we've disclosed. That should give you a complete insight and confidence into the solid credit calibration underwriting that we have been speaking about.
Sure, sure, sure. And so sir, if you would just help me with the write-off policy for our unsecured products, what would be the write-off policy on that? 180 DPD. Overall the products, whether secured, unsecured?
Yeah, so unsecured is 180 DPD. Vehicle secured is 365 DPD. Yeah, and even loan against property is 730 DPD, which actually is case-by-case basis across the industry.
Sure, sure. And just one more thing. On the 294 branches and currently 320, I think which we mentioned, so apart from gold loan, what other products would we be currently offering? So what's the plan there? Just wanted to understand that, yeah.
So I think our branches that we are talking about are focused. Our gold loan branches are going to be fairly die-hard gold loan branches. That's the plan right now. And that's what I had mentioned last time. We are very focused product on the branches. There will be some benefit of cross-sell, but I think it's going to be a very bold, bold kind of branch. We're just focused.
Understood, understood. And so on the new disbursement, which is like 20% of the overall disbursement.
Cross-sell might happen, but directionally, it's a very focused gold loan branch for us. Sorry. Yeah, you were asking a question.
No, no, sorry. Got it, got it. So basically, dedicated gold loan, but some other benefit from cross-sell, then we won't deny that. So that's the point. In short,
like other cases won't happen, but we are a focused branch designed for gold loan. That's all I have at this point. Yeah. Sorry. Over to your question.
Sure, sir. Understood, sir. And also, sir, on the disbursement from the new products, which was currently around 20% for the quarter and 11% of the AUM, so any ballpark targets here? So what kind of percentage in the overall AUM mix are we looking for the new products by the time we reach a lakh crore of AUM?
I think, see, the plan on these new products are well calibrated. We're servicing a very distinct objective. Personal loan is a very salaried. We're getting fantastic. We're very happy with the way it's building up, acceptability of corporates. You heard that it's high-quality asset. If you look at consumer durable, we're investing behind a customer franchise. If you look at commercial vehicles, it's picked up very good momentum. If you look at gold, I think it's continuously quarter-to-quarter building up fantastic. So objective is going to be we will keep investing behind these businesses to increasing. But remember, bulk of the heavy lifting investing has been done.
And I think we'll be probably fair to say that operating leverage will start kicking in now. And that was the whole original plan. So we had said that the first 18 months, we would be probably biased to a little more AUM and investments. I think all that heavy lifting done, you started to see probably operating leverage started to kick, and you can start seeing the sparks now in terms of probably robust profits. You can start smelling that, and I think we are very excited from here on.
Thank you for patiently answering all the questions. I have more, but I'll fall back in with you. Thank you and all the very best. Yeah. Thank you.
Thank you. Ladies and gentlemen, we are requested to limit the questions to two participants. The next question comes from the line of Abhijit Tibrewal with Motilal Oswal. Please go ahead.
Yeah. Good evening, and thank you for taking my question. First question is on the gold loan and CV business. What I heard during the opening remarks is we have crossed 300 gold loan branches. But when I see our presence, it is predominantly Western India, Gujarat, Haryana, Rajasthan, Maharashtra. So if you could just help us understand, is the idea to first capture the central and northern parts of the country, and then eventually Western India? So I'll have a moment on that. And consumer durable, also, I kind of heard that 90% of our dealer presence is somewhere in tier 2, tier 3 cities. So, what is the playbook which will be there in CB as well?
I could hear your full questions, but gold loans, I think if you're asking effective quarter three, I think we should be in the range of approximately 191, 192, somewhere there. But all the LOIs, identification all that has been done, and the remaining branches, we should be on track in this quarter. We should be in a position to build a very solid franchise, like I said earlier, with a focus on gold. Gold is giving us good deals, good asset class, and it's in line with plan. On consumer durable, whatever little I could hear, and please correct me and add to the question, whatever I understood you said, what's the momentum feel on Tier 2, Tier 3 cities? I think if I'm not mistaken, we already had close to 10,000 plus outlets.
Our strategy is mix of consumer durable. Because we've got as a company strong strength on unsecured digital, we don't need additional manpower. We are finding that that experiment started as an experiment probably. Now, along with consumer durable, we could be the first company that our resources are not only doing consumer durable, but digitally.
We have a certain proportion of origination, which is coming with the same team on unsecured digital loans, and very successfully so. Remember, just to give you a sense, the consumer durable might have an average ticket size of, let's say, ₹28,000 approximately. An unsecured loan in throughput could be ₹4.5-6 lakhs. The throughput and productivity of the team with the yields, even at the point of origination, not at cross-sell, we could be the first company to successfully pull it off.
That itself gives us a huge advantage on the consumer durable reach and the business model being more robust. Then a conventional, pure, only consumer durable model is the same team. I hope I'm able to get across.
Got it. And is the line better now? I'm sorry, you could not hear me earlier.
In between the interview, your voice goes clearer, and suddenly we can't hear you. Something like that. But please go ahead. I can hear you clearly.
Okay. Sorry about that. So that answers my question. The only other follow-up I had on gold loans was, I mean, right now, I've seen the branch presence is predominantly in Western India. Is that the thought process to first capture Western India, Central, and Northern India, and then move to Southern India?
Yeah, yeah. So we are going to be actually, we have covered already Gujarat. We are in Maharashtra, Rajasthan. We are going state by state because gold loan is a product where you have to have a supervisory depth because we're opening branches. The next geography which we are picking up now is Karnataka and some part of Odisha.
That is how we will spread our branches. Got it. That is the if you don't want to you don't want to just spread yourself in gold, it's important we've done this business in the past. Very important to have density pockets with supervisory depths because one of the biggest advantages and risks is you need very solid controls when it comes to gold branches. You'll appreciate that. That's the background.
Got it. The second question I have was on credit costs. Just trying to understand why. I think, again, during the opening remarks, I kind of picked up that barring instant loans which have higher credit costs, most of the products are showing range-bound credit costs of about 1.4%-1.5%. So I had two subparts to this question, Arvind, sir. First thing is, I mean, whatever credit costs that you see right now, are they all attributable to the newer and existing products that you earlier had? So this has nothing to do with any activities I talked, which you called out in the presentation. These are all business-as-usual credit costs, right? It's 2.6% credit costs that you're seeing right now?
Oh, I think let me explain that point again. It's very nice of you to raise it again. I think the point that I and Sriram are highlighting is that whether it's instant loans, whether it's the remaining 12 products, all individual credit costs are showing constant improvement so far. That's point number one. I think the limited point we wanted to share with you that is part of our design to optimize when you look at our credit costs, you must keep in mind that you should treat it as, in simplistic terms, a mathematical average of instant loan, consumer loans, and the remaining 12 products.
So while explaining, I said instant loans relatively by design is higher yield, higher credit costs, whereas the others are normal yields and normal credit costs. More as a reference point. But I think the larger point I wanted to say is that when you look at our credit costs, look at two important things.
It's a mathematical mix of the 12 products and instant loans. So that, let's say the contribution is 15, 18, or 20 because individually, all products might actually land up reducing in our credit costs, and we could have a great opportunity for ROA build-up. It's a very limited point just to understand. Also, looking at our growth rate, please remember, as NBFCs, you have a higher natural provisioning. So that also complements, if you grow at a higher rate, becomes part of your total credit cost. It's just sensitizing the total picture. That's about it.
Got it. When we said that credit costs will reduce in the coming quarters and years, the primary driver is going to be the improvement in product mix in favor of gold loans, LAP, education loans, right? Rather than the seasoning of these products because once the seasoning, maybe the credit costs will start inching up. So the primary driver is going to be primarily the improvement in product mix.
Let me repeat again. All 13 products with seasoning are expected, and calibration and strong connections are, in our assessment, expected to constantly improve every quarter. That's point number one. Point number two, it's in our hands. How do I mix it for respective total credit costs to optimize the ROAs of the company as from here on? ROAs will become an important thing. So let's say, for example, hypothetically saying you have an X product at a credit cost of, hypothetically, let's say, 2%. And you have another credit cost at, let's say, 3%. Now, either you take 50/50 and have a credit cost total, or you can have a 60/40 and do it.
Similarly, when you have a mix of approximately 12 to 13 businesses, all we're saying is that the mix will be optimized. So you actually might land up with quarters going the 2% might become 1.8%, and the 3% might become 2.8%. But the mix could be in such a manner which could reflect the total credit cost that you actually might actually land up making very healthy ROAs despite individually improving thanks to collections, thanks to product seasoning, and our credit calibration. That's why I said you must check our 6MOB because Sriram, if you check our 6MOB, you'll get the picture. Not only is the Stage 1 improving, which is one part of the story. Not only the GNPA is improving. That's another part of the story.
But if you see carefully, 6MOB normally in any banking or finance business is a very solid indicator of what is the quality of calibration that you're doing across the portfolio. And you'll get a firsthand sense of how individual products will be fairly solid.
Got it, Arun sir. This is very useful, and thank you so much for your enhanced disclosures in this quarter. And lastly, this board approval for INR 5,500 crores of cash equity issuance in this quarter, we plan to continue it this quarter or after the end of this fiscal year? Hello, I'm audible? Really louder, sir. Yes, sir. So just last thing I was asking, could there be a second board approval for reaching INR 5,500 crores of cash equity? We plan to continue it this quarter or after the end of this fiscal year? Okay, sir. Then maybe I'll come back in the question team. Thank you.
Thank you. Thank you. Are you talking about the capital raise, if I get you right? If you are, then I think we've taken a 12-month approval, stapling approval. But I think you're well aware of our growth rates. Thank you, sir.
The next question comes from the line of Mr. Chawathe with Kotak Institutional Equities. Please go ahead.
Am I audible?
Yes, sir, you're
audible. Please go ahead. Okay. Okay. Okay. No, I just wanted to double-check whether the management line is connected. Yes, sir, they're connected. Go ahead with the question. Yes. So across these 13 products, how do you think about the duration of the book, let's say, across short, medium, and long-term loans? How are you really kind of thinking about balancing this? And in that sense, is there a little bit of a scope to play the yield curve? I believe you have increased the duration of the liabilities in the last two, three quarters. Duration of the liabilities. Yeah. So on the asset side, first of all, how are you thinking about the contribution of short, medium, and long-term loans? And what could be? I mean, are you kind of targeting a particular average duration of the book? And in that sense, how are you placed on the liability side?
Yeah. So across these 13 products, these are into different tenure buckets, right, from the long-term, something like loan against property, to consumer durable, okay, which is ultra-short-term. So I think the products are now there in every space, okay, of duration which we want to be. And like Arvind articulated, we look at how these products ramp up, and it gives us better risk-adjusted return.
So with that, I think we are pretty fine, okay, with the duration, okay, being six months here and there because we have a well-diversified liability profile and have the capability to raise money in every single tenure bucket on the liability side. So right now, also, if you look at our LLM, it is positive across each of the buckets, except that three to five years, which anyway, with the capital raise, okay, would be taken there. So I think that's fine. So we are flexible, okay, on the duration. So that's no specific.
What is the current duration of the book on the asset side?
Current duration of the asset, okay, would be somewhere between two and a half to three years.
Two years. Okay. And does it kind of change maybe in a year or so when the contribution of the newer product goes up? Or, is this the kind of?
While it may not change dramatically, but like I said, it will depend on the evolution of each of the products and the way they scale up. So this is it. But I think we are pretty broad. We should be there. We'll take care of that in whichever way it goes. Yeah.
Thank you. The next question comes from the line of Kaitav Shah with Anand Rathi. Please go ahead.
Yeah. Thank you so much for taking my question. Am I audible? Yes, you're audible. Yes, sir. First of all, congratulations, good quarter, and thank you so much for the increased disclosure. I think they're pretty useful. So my question is more on the operating leverage. I think you already pointed out that we've seen signs of improved operating leverage. And do you think this trend can continue, or there is still some investment that is left to be done at an overall aggregate level, which can keep the cost-to-income ratio topped up?
I think, see, the very fact are designed and, to be honest, a lot of investments, strategic investments, which we did over the last August financial year. And if you ask me, the trade-off is in complete favor of Operating Leverage. So not that you won't make incremental sales teams, and not that you won't have new branches. You'll have a certain proportion of that investment which are going on. But I think it's usually in favor of Operating Leverage from now on. And I would term this as we would be excited from here on on the Operating Leverage side. Directionally, the OpEx in percentage terms? OpEx and, yeah. But then we've said every directionally insured.
And I think you mentioned cost-to-income, and I think probably it will be a hard thing to see similar trends there as well as the years go by.
Got it. So the second question was on the AUM growth front. Companies have been far ahead of our long-term aspirations. Do you think near-term we would like to raise our guidance on the growth aspect, especially next year? Or we would still like to stick to what we?
Just be a little louder, if you don't mind. I can hear you, but in between, I'm not able to figure out what you mean.
Okay. Sir, on the growth front, would you like to reiterate the target because we've been growing slightly higher than our long-term average is? So near-term, will we continue to grow higher given that the new products are firing much better than expected?
Our focus is going to be completely biased to the retail products, the full bouquet of retail products, especially the new ones. But I think our broad guidance of 35%-40% is what I like to say is a good guidance. There could be some moments where we may have had much better than that. But I would probably hold that broad approach directionally to be 35%-40% is what I would like in today's economy. Yeah.
Thank you. Ladies and gentlemen, this will be our last question. It's from the line of Agam with Agam Investments. Please go ahead.
Thanks for the opportunity. Just a quick question on the credit costs. So credit cost of this quarter was around 2.62%. Going ahead, what can be this? I assume the number will go down. So what can one look at? Sorry to interrupt. Mr.
Arun, could you please repeat your question again? I can't hear you. Sir, I can't hear you. Am I audible now? Yeah, better. I'm saying the credit costs of this quarter, so going ahead, as you said, it will go down. What can it be? Any thoughts or color on that? We are not giving any forward guidance, but we kind of, as the contribution of these new products such as gold loans, education loans, real-time, and all of the new products keep growing and gain full-scale participation in the product market, the share of the credit-calibrated incentive will be normalized at a lower level. And this will have a favorable bias on the overall credit cost. Okay. Okay. Just a last question. On the LAP part, I think maybe I missed the voice. Can you repeat what is the?
So we have taken the investment for 12 months. What is the timeline? Realistically, we are looking to close since we are growing at a much faster pace. Yeah.
So we basically look at the way the growth pans out from here on. And this is that, okay, which we will do the typical days. So we don't have a specific timing in mind, right? I think the part is that we've taken the approval gives us the strategic flexibility now. And it's in our control. And we're well on top of it. I think that's the limited point. There's no particular guidance we are giving on the timelines.
Thank you, sir. Ladies and gentlemen, that was the last question for today. With that, we conclude today's conference call. On behalf of Poonawalla Fincorp Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.